1969-1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969-1972|
Released by the Office of the Historian
43. Memorandum From the Under Secretary of the Treasury (Walker) to President Nixon/1/
43. Memorandum From the Under Secretary of the Treasury (Walker) to President Nixon/1/
Washington, December 12, 1970.
/1/Source: National Archives, RG 59, Central Files 1970-73, FN 10 IMF. No classification marking. Attached to a December 15 memorandum from Secretary Rogers to the President endorsing Walker's request that the President call Senator Mansfield in an effort to bring the legislation up for a vote.
Senator Gore is successfully filibustering the authorization bill for a U.S. quota increase in the International Monetary Fund, and contributions to the World Bank, the Inter-American Development Bank, and the Asian Development Bank. As is indicated in the attached excellent article from today's Washington Post,/2/ all efforts to obtain a vote have failed.
These efforts are likely to continue to fail. If so, such failure would constitute at least a temporary--and perhaps a longer lasting--setback to your policy of shifting toward multilateral aid (i.e., as in the Peterson Report).
The only courses of action now open seem to be:
(1) A call from you to Senator Mansfield urging him to put the pressure on Gore--through long sessions, suasion, or perhaps cloture--to allow a vote on the merits.
(Yesterday's procedural vote on recommittal indicates strong Senate sentiment for passage of legislation intact.)
(2) Acceptance of a Gore amendment to hold back the "soft loan" authorizations for IDB and ADB, so that the IMF quota increase, and a nominal rise in our World Bank capital, could pass this session.
Only you can judge the drawbacks of your approaching Mansfield as suggested. He might or might not be cooperative. If cooperative, there would be a fairly good chance that he could beat Gore.
But it seems to me that there is much more at stake here than mere passage of this bill at this time. It seems to me that Mansfield should understand clearly that weak leadership efforts on his part on Administration legislation--especially legislation with which he fully concurs--will not go unnoticed at the highest level. As I have stated in other memoranda to you, I am convinced the coming two sessions of Congress are going to be most difficult from our standpoint, and I think Mansfield should understand that we are going to fight hard for our programs.
The advantages of moving on the IMF and World Bank portions are strong: we would save $130 million in "special drawing rights" which we must claim, through the authorization legislation, before January 1, 1971. But the disadvantages are also important: With the third replenishment of the International Development Authority (soft loan window of the World Bank) coming up, we would be presenting to Congress next year requests for total "soft loan" funds amounting to a whopping $2.1 billion ($1 billion for IDA, $100 million for ADB, and $1 billion for IDB). This would be in addition to any large foreign aid request the Administration may forward to the Hill next year.
Although passage of so large a measure would not be impossible, it would certainly be difficult--especially in view of the fact that our Republicans in the House, who responded loyally to your requests in this session on this legislation, would have to vote for the same measure all over again.
The other great disadvantage of splitting the bill is clearly described in the Post article--the blow to our prestige in Latin America, especially in view of the fact that our friends to the South view the IDB capital increase as our major contribution to your new "mature partnership" in Latin America. The timing is especially unfortunate in the light of the announcement that Ortiz Mena will head the IDB./3/
/3/Antonio Ortiz Mena, who until August 1970 was Mexico's Minister of Finance, had been elected with U.S. support as President of the Inter-American Development Bank at a special meeting of the IDB's Board on November 27. Argentina and Venezuela had also put forward candidates for the position, apparently with some support elsewhere in Latin America, and the election had been contentious. Secretary Kennedy summarized the issues in a December 10 memorandum to President Nixon. (Washington National Records Center, Department of the Treasury, Secretary's Memos/Correspondence: FRC 56 74 A 7, Memo to the President--September-December 1970)
Recommendation: That you call Senator Mansfield requesting him to use all of his persuasion and powers of leadership to bring the measure, intact, to a vote in this session.
(Secretary Kennedy, who is out of town, strongly supports the above recommendation.)
44. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
Washington, December 15, 1970.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 289, Treasury, Volume I. No classification marking. A stamped notation on the memorandum reads, "The President has seen."
Our International Financial Institutions Bill (IFI) is in deep trouble, and Treasury recommends (Tab B)/2/ that your personal intervention is needed to make its passage possible during this session. Secretary Rogers endorses Walker's recommendation (Tab C)./3/
/3/Not printed; see footnote 1, Document 43.
The IFI bill includes authorizations for continued US participation in the Inter-American Bank and the Asian Development Bank. It also provides for our share in the expansion of the International Monetary Fund and the World Bank.
Senator Gore is using this legislation as the vehicle for his swan song vendetta against the Administration. The bill will pass easily if brought to a vote on the Senate floor, but Gore has succeeded twice in talking it off the calendar. It appears that only your strong personal intervention may be sufficient to induce Senator Mansfield to shut off Gore, with long sessions, persuasion, and a cloture vote if necessary.
The bill is crucial to our foreign policy in several respects, and I therefore urge you to intervene with Mansfield:
--The sharp increase in our Inter-American Development Bank contribution is the most important concrete demonstration of our deep interest in development in Latin America and is regarded by the Latins as our major contribution to the new "mature partnership" with them. It is particularly crucial now as we attempt to prevent Chile from mobilizing hemispheric support against us.
--The Asian Development Bank is the only concrete evidence of our interest in supporting Asian regionalism.
--The IMF quota increase must be passed if we are to get our proportional share of the next allocation of Special Drawing Rights. Failure of this legislation would cause us to lose $130 million in essentially free international reserves.
The authorization bill has already passed the House. Senate author-ization is needed now if the appropriations are to be available early next year, when they are needed.
More important, postponement into next year may delay the authorization significantly because the committee may then wait to see your whole new aid proposal before voting on it. In addition, early next year we must submit legislation authorizing our share in the doubling of the resources of the International Development Association, the soft-loan window of the World Bank, which is the most important single component of our multilateral aid theme. Linking that proposal with the other IFIs would present such a large sum of money that the Congress might balk. If we don't get this legislation now, it will thus probably be much harder to get the larger package next session.
It would be tragic to let a single lame duck Senator stop legislation which constitutes a major element of your foreign policy. Senator Mansfield, however, has so far been very reluctant to stand firm against Gore. It is not certain that your intervention would succeed in getting him to do so, but it seems that nothing else has a chance.
That you call Senator Mansfield urgently to try to persuade him to bring the IFI bill to an early vote on the Senate floor, using the talking points at Tab A. State and Treasury strongly support your making such a call. Bill Timmons opposes, on the grounds that Ken BeLieu has already spoken to Mansfield about the issue three times and that a further call is unlikely to change the situation, in view of the availability to Gore of further delaying tactics./4/
/4/The President wrote "no" below the last paragraph. No additional documentation on this legislation was found but a compromise apparently was reached and the impasse broken. According to the President's signing statement on December 31, the soft loan funds for the Asian Development Bank were dropped from the legislation and only a down-payment was authorized for the Fund for Special Operations in the Inter-American Development Bank. The President promised legislation to restore his requests early in the new Congress. See Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 1164-1165. That request was sent to Congress on January 26, 1971; see ibid., 1971, p. 72.
45. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 318, Cooper-Church Amendment. No classification marking. The NSC Correspondence Profile sheet indicates the memorandum was logged in on December 21.
--The Supplemental is being held up by Senator Fulbright through the device of refusing to convene a conference with House conferees.
--Senator Church has pledged to break the impasse if Secretary Rogers will give him a letter which in effect will express the Administration intention to conform to the restrictions on ground troops or advisors in Cambodia contained in Section 6 of the appropriation bill (at Tab B)./2/
/2/Not printed. The Cooper-Church Amendment would restrict U.S. military activities in Cambodia. See Document 28.
--Church and Fulbright fear the Administration will take advantage of the broader language contained in the DOD appropriations bill (at Tab C)./3/
--Assistant Secretary Abshire believes such a letter is essential to passage of the Supplemental. (Draft language at Tab A.)/4/
/4/The draft language, dated December 19, reads as follows: "Dear Senator Church: Confirming Assistant Secretary Abshire's conversation with you, I should like to affirm that the Administration's programs, policies and intentions in Cambodia in no way conflict with Section 6 of HR 19911, or with the concerns expressed in the colloquy on the floor of the Senate on 15th December."
--Bill Timmons believes it may be essential.
--It is State's position that such a letter merely confirms what you told Senator Church at the reception last Tuesday, and what you stated at your press conference./5/
/5/Not further identified.
--The colloquy referred to in the letter (at Tab D)/6/ contains the following "concerns":
--That you would seek congressional consent before undertaking a full-scale invasion of Cambodia.
--That the President's powers and responsibilities as Commander-in-Chief not be interfered with.
--That an "incursion" would be within the President's power to act without Congress.
--That an incursion on the scale undertaken last spring would be prohibited under the new language.
The draft language is approved/7/
/7/The President initialed this option. The correspondence profile sheet contains a December 28 notation from Lehman that reads: "Language OKd by Pres, sent by Rogers to Cooper & Church, deal made. Supplemental sprung from Conf and passed Senate Wednesday 23rd. Hurrah!"
The draft language is disapproved
46. Action Memorandum From K. Wayne Smith of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, January 4, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Top Secret; Sensitive; Urgent.
Dave Packard has sent the President a memo (Tab A) appealing some of the tentative budget decisions made by OMB regarding the FY 72 military assistance program./2/ Packard argues that the recommended changes "are necessary if we are to maintain military assistance and credit sales as the essential instruments with which we will continue to implement the Nixon Doctrine." I understand he also called you to express his concerns./3/
/2/Dated December 30, 1970; not printed.
/3/See also Document 47.
The Packard memo makes the following procedural points:
--For the second year in a row OMB obtained decisions on budget requests for military assistance without a Department of Defense representative being present to express his views.
--The levels jointly recommended by Defense and State were not used as the basis for decision.
The memo specifically appeals to the President to raise the MAP amounts budgeted for:
--Taiwan (from $15 to $ 25 million)
--Greece (from $15 to $25 million)
--Turkey (from $90 to $130 million)
--Jordan (from $30 to $50 million)
The memo makes the observation that:
--the amount budgeted for Foreign Military Sales (FMS) credit is based on an assumption that such credit in the amount of $250 million will be available in FY 71 and, if necessary to obtain it, a supplemental request will be made in January to the new Congress.
Finally, the memo recommends that:
--FMS credit for Israel in FY 72 be budgeted at $100 million and that any additional requirement be met through the Jackson Amendment,
--a dedicated MAP Contingency Fund of $25 million be established.
This is the kind of memo that will eventually drive me to drink. But let me try to sort out the issues and non-issues.
Packard is right in saying that the levels jointly recommended by Defense and State were not used as the basis for a decision. The reason is simply that the joint Defense/State recommendations were not available at the time the decisions were made. As I understand it, State's and Defense's recommendations regarding MAP and FMS were due in early December. After daily appeals by OMB, they were made available (separately from State and Defense) at the staff level, around the middle of December. When State and Defense learned of OMB's tentative decisions, they apparently logrolled a new joint position which was forwarded in a memo to OMB, dated December 23, 1970./4/
/4/Identified in Packard's December 30 memorandum as a letter from Irwin to Shultz; not found. Secretary Rogers on December 31 sent a memorandum to President Nixon with an appeal, similar to Packard's, of the OMB-recommended funding levels. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 226, Department of Defense 12/1/70-2/23/71)
The original agency requests that I saw (shown in the table at Tab B),/5/ discussed at Shultz's request with OMB, used in my memo to you dated December 18, 1970 (Tab C),/5/ and later discussed at length with you, differ from the December 23 requests in several ways. (You will recall that in our discussion you agreed to the NSC/OMB figures except you asked for another $100 million in import financing for Vietnam and another $50 million in the President's contingency fund.) These differences are summarized below together with the initial OMB recommendations and the agreed OMB/NSC figures based on the earlier agency requests.
I think it is apparent from the above table that I drove a relatively hard bargain with OMB based on the earlier agency requests--though it looks less hard in light of the later higher requests.
As to Packard's point regarding representation, representatives from the agencies are never allowed at OMB's "Director's Review" sessions. These are internal OMB staff sessions with the Director to prepare him for later discussions with the President and with representatives of the agencies. On occasion, White House personnel are invited to attend these sessions as Ed David and I were this year. Packard's assertion that a new procedure has been adopted over the past two years is simply untrue. The agencies have ample opportunities to make their views known as his memo attests.
Packard states that the proposed MAP level of $15 million "is not consistent with our objectives of upgrading the air defense and reorganizing the Chinese Armed Forces" and should be raised to $25 million.
It should be pointed out that the total MAP and FMS funds budgeted by OMB for Taiwan is $65 million. This is the same as the total amount requested by Defense/State. The OMB figure contains $10 million more for FMS because they believe countries with large cash reserves such as Taiwan should rely somewhat more on FMS and thus free up more MAP funds for countries without large reserves.
Greece and Turkey
The Packard memo notes that "these two countries occupy key strategic positions with respect to the critical Middle East situation," that Secretary Laird's recent trip to the area "convinced us that they are doing a fine military job with limited resources, but both are badly in need of new and relatively expensive equipment," and that "now is certainly not the time to reduce military assistance to these countries."
To begin with, military assistance to Greece and Turkey is not being reduced. MAP assistance to Greece in FY 71 is $17.7 million and to Turkey $92.1 million. OMB's FY 72 recommendations are $15 million in MAP and $45 million in FMS for Greece and $90 million in MAP and $8 million in FMS for Turkey. In both cases, the totals are larger than for FY 71.
Moreover, in the case of Greece, the issue again is more one of composition of MAP and FMS than the total. Greece has more than ample cash reserves, some of which could be used for FMS purchases. In regard to Turkey, OMB has serious doubts about Turkey's ability to absorb more than $100 million in MAP.
According to Packard, "the Senior Review Group is considering a three-year program estimated at $140 million and it appears to be generally agreed that at least the FY 1972 increment will have to be grant aid. If so, $50 million will be required and I recommend this amount." All of this is news to OMB (and to me)./7/ The earlier request for Jordan was $30 million which I convinced OMB was necessary. I believe OMB is prepared to raise the MAP amount for Jordan if you so desire. (Purely as an aside, has anyone looked into what impact such an expenditure would have on the Jordanian economy?)
/7/Senior Review Group meetings on October 9 and December 17, 1970, dealt with Jordan but no record of subsequent meetings was found, although Jordan may have been discussed in broader meetings on the Middle East. (National Security Council, Secretariat, Record of NSC and Related Meetings 1/20/69-12/31/72)
State requested and the OMB mark provides $300 million in FMS credit. Defense requested $100 million in FMS for Israel and the Packard memo appears to be appealing the OMB mark downward. The rationale is not clear, particularly since, if the Defense recommendation were followed, the budget would understate the need. Presumably Defense would propose seeking an additional $200 million later under the Jackson Amendment. The OMB mark would reserve the Jackson Amendment as a fallback if the funds are not provided by Congress under the Foreign Military Credit Sales Act. This would seem to be the more sensible strategy.
The OMB mark is $100 million for foreign aid contingencies, whether military or economic assistance or disaster relief. This is several times larger than the fund has been in recent years ($12-15 million). It was increased by OMB from $25 to $50 million specifically at my request and from $50 to $100 million at your request.
Defense wants a separate earmarked military assistance contingency fund of $25 million instead of the amount being part of the President's contingency fund. In my judgment this would reduce Presidential flexibility. Moreover, if the $25 million MAP contingency fund sought by Defense should prove to be inadequate, it is questionable whether the President's fund could then be used for that purpose.
Foreign Military Sales
Defense is not appealing the OMB mark, which is higher than Defense requested. Defense seems merely to be going on the record to the effect that if the Congress does not appropriate funds for an FMS program in 1971, a later upward amendment to the 1972 budget amount may be needed. There is no disagreement on this point.
Except for Vietnam and Cambodia, there is no analysis to support any of these numbers. We are all groping in the dark, relying on precedent and intuition, and guessing at levels and composition. I have no analytical basis for knowing whether the MAP and FMS amounts for the countries concerned should be increased or decreased or should remain the same; neither does State/Defense or OMB. My inclination is to ask for more based on the principles of having cut insurance with the Congress and having too much rather than too little.
We badly need some analysis in this important area. The only thing that is clear is the overall trend of our assistance programs. The trend is clearly up--and up substantially. Even without any more increases, the total MAP program in FY 72 will be $688 million. This compares to a total program of $391 million in FY 70 and $436 million in FY 71 ($776 million if the $340 million in the supplemental is included). In addition, we are planning on a $100 million contingency fund in FY 72 (compared to $15 million in FY 71) and Foreign Military Credit Sales of $602 million compared to $70 million in FY 70 and $250 million in FY 71. Finally, the supporting assistance program for FY 72 will be $818 million, up $205 million from FY 71 and $304 million from FY 70.
As a result of discussion between the two of you in San Clemente last summer regarding memos to the President dealing with budgetary items,/8/ Shultz believes that OMB should have the action on this memo. He has already asked Schlesinger to discuss the issues with Defense/State. From my conversations with Schlesinger, I know that he is willing to raise Taiwan from $15 to $20 million, Turkey from $90 to $100 million, and Jordan from $30 to $40 million simply on the basis of the new requests alone. He will probably go even higher if you support the Defense/State requests.
/8/Not further identified.
/9/No record of Kissinger's action on these recommendations was found, and the column for his recommendations in the table below is blank, but see Documents 47 and 48.
--(1) That you make your views known to Shultz regarding the MAP requests for Taiwan, Greece, Turkey, and Jordan.
--(2) Alternatively, that you make your views known to me and I will relay them to Schlesinger.
--(3) That you forget about the issues of procedures, a separate MAP Contingency Fund, budget strategies for obtaining FMS credit for Israel, and the assumptions underlying the FY 71 Foreign Military Credit Sales Act.
--(4) That action on answering the Packard memo be formally given to OMB.
47. Memorandum From the President's Deputy Assistant for National Security Affairs (Haig) to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, January 4, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Top Secret; Sensitive. A handwritten notation on the memorandum indicates the message was sent to Kissinger telegraphically. According to the President's Daily Diary, Kissinger was in San Clemente. The President traveled to San Clemente on January 5. (Ibid., White House Central Files)
This is the memo which Dave Packard called you on./2/ I think it is important that you do not get caught in the middle between OMB and Defense and there is something to be said for both sides.
/2/See footnote 2, Document 46.
I agree with Wayne/3/ that you should permit OMB to answer Packard's memo and to establish the final mark on each assistance program. After telling Shultz that he should raise Taiwan from 15 to 20, Turkey from 90 to 100 and Jordan from 30 to 40, Defense's proposal on Israel is a disaster and OMB should be sustained at $300 million in foreign military sales credit versus the $100 million suggested by Defense. I also believe that the contingency fund directed by you should be sustained.
/3/K. Wayne Smith. See Document 46.
In short, I recommend that we inform Packard's office of the increases for Taiwan, Greece, Turkey and Jordan and then tell Shultz that we anticipate that he will make these increases and let OMB handle the balance being sure that Smith tells them to hold firm on the contingency fund and the FMS credit for Israel.
48. Action Memorandum From Richard T. Kennedy of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
San Clemente, California, January 7, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 196, AID 1/1/71-12/31/71. Top Secret; Sensitive; Urgent. This copy of Kennedy's memorandum is on White House stationery, but Kissinger and Kennedy were both in San Clemente, as was OMB Director Shultz.
Wayne Smith called to give you the latest status on the OMB budget recommendations. Referring to page 7 of his memorandum attached,/2/ the revised figures are as shown:
/3/Kissinger wrote in the figures in this column. Above the column, Kennedy wrote on January 7: "Called to Wayne Smith." See also footnote 5 below.
The rationale for the OMB recommendations (with which Smith agrees subject to your approval) is as follows:/4/
/4/At the end of the memorandum Kennedy wrote on January 8: "I subsequently mentioned to HAK the fact that MAP contingency fund request had been raised from $15 to $100 million--thus the levels were not frozen should needs arise later in the year. HAK said he wants to hold firm on the $25 million for Taiwan and prefers $25 million for Greece though would not fight to the death on the Greece figure."
Taiwan. State urges the additional funds because of the possible foreign policy problems which may arise. OMB has raised its original recommendation by $5 million. The total of MAP and FMS is equal to the total of $65 million requested by State and Defense. OMB adds $5 million to FMS and reduces MAP by $5 million because Taiwan is flush with cash reserves and in a position to buy./5/
/5/At the bottom of the first page of the memorandum, Haig (presumably at some later date in Washington) wrote: "Haig/HAK Shultz 8 Jan phoncon," drew a line to the Taiwan and Greece rows in the table, and wrote to the right of Kissinger's "$25" entries, "Now 20."
Greece. Again the total MAP and FMS equals the $60 million requested by State and Defense. OMB however puts more in FMS and less in MAP because Greece is flush with cash reserves and can buy (they cite purchases of aircraft from France, for example).
Turkey. For the past five years MAP for Turkey has run between $90 and $95 million. OMB and Smith believe Turkey cannot absorb more than $100 million in MAP. There also is $10 million in FMS (for a total of $110 million).
Jordan. State and DOD originally requested $30 million. OMB agreed to this level. The latest State-Defense request is $50 million. There is no definitive estimate on which this is based. OMB is willing to increase from $30 to a total of $45 million.
Ethiopia. OMB agrees with State's strong request for a total of $13 million.
Indonesia. OMB has put in $25 million per our request.
If you wish any changes we should get them to OMB today since Budget is going to press tonight. Smith believes the latest OMB proposals (the revised OMB column) will do the job. You might wish to talk to Mr. Packard about this to be sure that no wires are crossed.
49. Memorandum From Secretary of State Rogers to President Nixon/1/
Washington, February 19, 1971.
/1/Source: National Archives, RG 59, Central Files 1970-73, AID (US) 1. Secret. Drafted by Ronald I. Spiers (PM) on February 18 and forwarded to Rogers under cover of a February 19 memorandum from Under Secretary Irwin indicating that the memorandum had been prepared at Rogers' suggestion. (Ibid.)
The report of the Under Secretaries Committee on the new International Security Assistance Program was transmitted to you on February 5./2/ Since that time the Office of Management and Budget has been working with an Interdepartmental Group on the preparation of the implementing legislation. There appear still to be major points of disagreement between ourselves and the Department of Defense on some of the key issues involved. Because these issues go to the heart of the way responsibilities are handled in the foreign policy field, I wish to give you my views on them, supplementing those I sent you on August 4 of last year./3/
The position of the Department of Defense, as I understand it, is that all elements of security assistance should be funded in the DOD budget, and, accordingly, that jurisdiction over the program should reside in the Armed Services Committees of the House and Senate.
Originally the Department of Defense desired a change in the pres-ent statutory authorities to give the Secretary of Defense more and the Secretary of State less authority over policy. Now Defense apparently believes that if the new program were shifted to the Defense Department budget it would not press for change in the present division of statutory authority between the Secretaries of State and Defense. Defense appears not to have made a judgment as to whether the responsibility for the administration of supporting assistance (presently administered by AID) should be placed in Defense or State, or in some new body outside the jurisdiction of either. State and Defense concur that the basic guidance for program planning should continue to come from an annual State-Defense memorandum.
The major rationale expressed by the Department of Defense for its position is that security assistance finds its primary justification as a "trade off" for the maintenance of U.S. forces overseas. Thus, its approach to the Nixon Doctrine stresses higher local force improvement goals and accelerated local force modernization. These are viewed as replacements for U.S. forces which would be withdrawn or as ways to decrease U.S. base line forces to the virtual exclusion of the other significant military-security, political and economic considerations. In this, I believe, lies the heart of our difference.
I believe that there should be no change in the present division of statutory authority between the Secretaries of State and Defense and that there should be no change in the present Congressional Committee jurisdiction for the new program.
In my view, security assistance is primarily an instrument of our foreign policy. As I stated in my memorandum of August 4, it should be "tied firmly to our foreign policy objectives and priorities." I have no differences with Mel Laird over the use of this program to build up self-reliant security forces for our allies, but I believe that the program must be broadly enough conceived, directed, and administered to ensure that the necessary technical capability and economic underpinning are available to our allies to support the security forces required and at the same time to allow our allies to continue on the road toward healthy economic development.
The guidance which you have provided for the Nixon Doctrine in your speeches and statements has always drawn a careful balance between the strengthening of local force capabilities and political and economic considerations. The Nixon Doctrine has not been and should not be presented in exclusively military terms--a course which would impair its acceptance by significant sections of the Congress and the public and would erode its great potential for providing the basis of a new consensus on America's role in the world. Of course, the military portion of the program and its contribution to the security of ourselves and our allies will remain a principal factor in establishing our broad foreign policy objectives under the Nixon Doctrine.
For the bulk of the security assistance recipients, the "trade off" is not the principal consideration, and linkages to U.S. defense programs are of secondary importance. Only in Vietnam, which would remain in the Defense budget as at present and would not be incorporated in the new Security Assistance Program, is the "trade off" for U.S. forces a principal consideration. While it is true to a lesser degree in Thailand and Korea that U.S. forces can be withdrawn through replacement by local forces built up through the new Security Assistance Program, even in these two instances such foreign policy considerations as the economic viability of the country concerned and its technical capability to undertake the defense program required are at least of equal importance with the question of the "trade off" for U.S. forces.
In all other cases, from Latin America, through Liberia and Ethiopia, to Turkey, Greece and Taiwan, "trade offs" between security assistance and the presence of U.S. forces are either negligible or nil. Accordingly, I believe that the "trade off" rationale will not be persuasive with the Congress, whose full support will be required if we are to initiate the reforms embodied in the new Security Assistance Program approach.
An important new element in the Security Assistance Program is the integration of military and economic assistance. It is important that the various facets of the new program be developed together and in a manner that is mutually supporting. There now exist the materials for a freshly conceived International Security Assistance Program, distinct in purpose and organization, as announced in your September 15 message on foreign aid in the seventies. The new program, for the first time, will bring together in a separate framework foreign aid with a predominant rationale related to our overall foreign and security policy objectives, thus providing a basis for a better public understanding of these programs.
As regards the issue of Committee jurisdiction, I understand the Defense Department arguments in favor of transferring the security assistance programs to the DOD budget and Armed Services Committee jurisdiction. I personally do not agree with the reasoning. Moreover, it appears that this is not a practical suggestion. It is my judgment that there is no way to achieve a change in Committee jurisdiction at an acceptable political cost. This view is apparently shared by all agencies except Defense, and Defense itself has not been able to suggest a practical means for making the change.
In sum, I believe it essential to retain the present language of the Foreign Assistance Act (Sections 622 and 623) as it governs the respective jurisdiction of the Secretaries of State and Defense. As stated above, I am also in favor of using the annual joint State-Defense memorandum as the basic policy document in this field. The administration of supporting assistance should be located within the State Department because this will be largely civilian staffed and will in effect handle residual functions of AID. The administration of military assistance and sales should remain in Defense. We should not attempt to change Congressional Committee jurisdictions and the funds for the Security Assistance Program should be appropriated to the President, as at present, not to the Department of Defense.
William P. Rogers
50. Memorandum of Conversation/1/
Washington, March 2, 1971, 11 a.m.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Confidential. According to attached routing memoranda, Bergsten drafted the memorandum of conversation on March 3, based on Rudolph Peterson's report of the meeting. A copy for the President's record was sent by Houdek to Jon Huntsman on April 26.
/2/According to the President's Daily Diary, Haig attended the meeting instead of Kissinger. (Ibid., White House Central Files)
Rudolph Peterson outlined the soundings he had already been taking on the Hill to prepare the way for submission of the President's aid reform proposals. He indicated that support was growing for the idea of delaying it for another year. The idea is to move the FY '72 appropriations quickly on the present AID basis, and then devote the rest of this Congress to deliberate consideration of the organizational reforms for the future.
The President replied that this program had already been delayed for two years. It was time to move and we should avoid any further delays. The reform legislation should be submitted immediately.
Rudolph Peterson then indicated that there was increased Congressional concern over the need for a single person to speak for the Administration on development assistance issues under the proposed new structure. They wanted someone who was operationally involved, and would not be satisfied to hear from the regional Assistant Secretaries of State.
There was agreement that the Congress was entitled to have such a person to look to, and that one must be found. Peter Peterson seemed to be the most logical candidate, since he would be coordinating the new aid structure. There was of course a major problem with his appearing before the Congress, however, so further thought needed to be given to the problem.
Finally, Rudolph Peterson asked whether the President would be willing himself to sit down with the Congressional leadership to help kick off the new program. The President responded affirmatively and would look to Mr. MacGregor and Rudolph Peterson to tell him when the time was right.
There was also some discussion regarding the organization of the new security assistance program. Rudolph Peterson strongly urged that State maintain its present responsibilities in this area. Dr. Kissinger noted that a decision was needed shortly and that it would be up to the President to make his judgment.
51. Action Memorandum From the Assistant Secretary of State for Economic Affairs (Trezise) to Secretary of State Rogers/1/
/1/Source: National Archives, RG 59, Central Files 1970-73, AID (US) 5. No classification marking. Drafted by Paul H. Boeker (E/IFD/ODF) on March 5; cleared by Weintraub (E/IFD), in substance by Carter (L) and Schnee (H), and by Arthur Hartman (S/PC).
I see an opportunity for you now to influence the President's decisions on aid reorganization in a way that may spare his new program from a possible Congressional rebuff and will also strengthen your grip on foreign aid policy. This opportunity arises in the form of two issues the President must shortly decide.
First, the Office of Management and Budget (OMB) will raise again with the President the issue of what basic form the new aid legislation should take./2/ The choice is between an act by which Congress authorizes specific new institutions, or a briefer, general bill which leaves all powers in the President to delegate as he sees fit to existing or new institutions created by executive order. The principals of the agencies concerned with aid reorganization, State, AID, Treasury, OMB, NSC, have been requested to state their views on this issue.
/2/See Document 53.
Second, Rudolf Peterson has told the President that his consultations indicate a very strong desire among key Congressmen that the President's proposals provide a coordination locus, in the form of a single man concerned with both operations and policy whom the Congress can look to on all foreign assistance issues./3/
/3/See Documents 50 and 52.
Issue of Legislative Form
At the March 4 meeting of the interagency Steering Group headed by OMB,/4/ Assistant Director Schlesinger stated that OMB feels the new aid act should not create institutions, but merely authorize programs--capital assistance, technical assistance, etc.--and appropriate funds to the President. The President would then delegate his authority to new institutions created by executive order. These institutions could to some extent reflect the institutional structure proposed in the Peterson Report but several basic features would lapse. For example, the capital lending institution could not be incorporated nor have a board of directors, as such. OMB claims that last December the President did state a preference for having all powers left with the President, although at that time he probably did not understand that this precluded setting up an International Development Corporation. OMB favors this approach because it believes this leaves the President full control over foreign assistance, whereas the alternative, independent institutions authorized by Congress, gives the Presidents and Boards of these institutions significant authority in an important area of foreign policy.
/4/This meeting has not been further identified.
The NSC and AID representatives in the Steering Group took the view that the new legislation should take the form of Congressional authorization of the specific new institutions, including the major features of their structures and modes of operation. The NSC representative stressed that the President in his Foreign Assistance Message last September, based on NSDM 76,/5/ publicly stated his decision to create an International Development Corporation. Also, virtually all the work done on reorganization so far presupposes new institutions created by law.
/5/NSDM 76 is Document 136. The September 15, 1970, message to Congress is printed in Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 745-758.
If the President wants to undertake a meaningful reform of foreign assistance, he should be strongly inclined to this latter option and against the OMB approach. The basic newness of his proposals is their institutional reform and unless he places this before the Congress, the result is likely to be no meaningful reform. The type of act OMB desires is basically the structure of the present Foreign Assistance Act with all the administrative and foreign policy restrictions removed. But if asked to give the President such broad authority, the Congress is likely to concentrate on restricting his use of it, leading to an end-result that may differ very little from the current Act and may even further restrict his foreign policy flexibility.
Rudolf Peterson apparently received the impression that the President does want meaningful reform along the lines of the Peterson Report and that he is willing to give his proposals a strong kick-off and follow-up in terms of Congressional contacts. The President also told Peterson that he had rejected totally the tactic of seeking an FY 72 aid appropriation on the old basis--a possibility which Peterson told the President some Congressmen had heard about.
Issue of Coordination
The Steering Group, March 4, was briefed on Rudolf Peterson's report to the President that Congress wants a single man who is responsible for aid coordination and responsive to Congressional queries./6/ The NSC representative argued that this man should logically be Peter Peterson, although he recognized that the problem of executive privilege will require that someone else do the testifying. James Schlesinger stated that the Congress should be told that it is not going to get one man but 7 or 8 (the heads of IDC, IDI, OPIC, ISDI, people from State in charge of humanitarian and UN programs, etc.). We stated that State should play an important role in coordination and that we would have specific suggestions to put forward shortly.
/6/For the Peterson Report, see Document 128.
I feel strongly that neither the Peter Peterson nor multi-headed approach are responsive to the Congressional concern or realistic in terms of the foreign policy coordination problems involved in foreign aid. The strong Congressional reaction which Peterson reported to the President confirms our view that the President's proposals will be imperiled unless he provides a foreign policy coordination point, responsive to Congress. Congress, like OMB, has a legitimate concern that an array of new independent agencies not operate without policy and operational coordination with other foreign affairs interests. The Congress also feels strongly that this coordinator should be one to whom it can turn on all foreign assistance issues, security as well as development.
This can only be the Secretary of State, given your responsibility for foreign affairs, your role in both security and economic assistance, your position in both the NSC and the International Economic Policy Council, and your position vis-a-vis the Congress.
There are various ways you could mold the structure of the Department to support you in this role as coordinator of foreign assistance. You should consider the alternatives here at an early date. It is clear, however, that the Department can gear up to provide this coordination and do so in a way that focuses on the role of development in our longer-term foreign policy interests--the point the Peterson Report considered so important.
To be in a position to exercise this coordinating responsibility, we will need a strong section in the new aid legislation making you responsible for coordination and creating the new institutions subject to your policy guidance. In carrying out our coordinating role we could use the International Economic Policy Council as a vehicle for consideration of major issues of policy coordination, the Council's Operations Group for coordination of country program issues and our board memberships in the new institutions to facilitate oversight of operations. We could look at foreign policy as a whole and not disparate elements unmeaningfully forced into a single context.
I, therefore, recommend that you:
1. Support establishment of the new aid institutions by law, as appears necessary to follow through on the President's commitment to a new approach along the lines of the Peterson Report.
2. Urge the President to have the legislation on development aid designate the Secretary of State, under the direction of the President, as responsible for coordination of all economic aid agencies to the extent required to assure the consistency of their operations with the foreign policy of the U.S. (This modification of the legislation will meet Congress's concern about coordination and thereby greatly improve prospects for passage. It will also meet the sense of OMB's objection to legislative creation of the new institutions, because the President's control over these institutions is assured through you. This approach does not conflict with Peter Peterson's role because the Council on International Economic Policy is a creature of the President, under whose direction you serve, and because you, as Vice Chairman of the Council, and the Department as head of the Operations Group will use the Council as a vehicle for your coordination.)
3. Request the President to have the legislation create each new institution under the foreign policy guidance of the Secretary of State, the language used in OPIC's statute.
4. Inform the President that the Department promptly can be structured and staffed to carry out this role.
These recommendations have been discussed with the Under Secretary who agrees with them./7/
/7/None of the Approve/Disapprove options under the recommendations is checked.
Attached at Tab A is a memorandum to the President which incorporates these four points./8/
/8/Tab A, a March 5 memorandum from Secretary Rogers to President Nixon, urged the President to designate the Secretary of State as the focal point for coordinating U.S. economic assistance policies and agencies. The memorandum assured the President that this approach would not conflict with Peter Peterson's role on the Council on International Economic Policy.
52. Memorandum From the Assistant Secretary of State for Legislative Affairs (Abshire) to Secretary of State Rogers/1/
Washington, March 8, 1971.
/1/Source: National Archives, RG 59, Central Files 1970-73, AID (US) 1. Confidential. Drafted by Schnee (H). Copies were sent to interested officials in the State Department and AID, to MacGregor at the White House, and to Bergsten at the NSC.
Last week Rudolph Peterson participated in a dozen meetings on the new foreign assistance proposals. The message is that Congress will not vote to abolish what it considers to be its effective oversight function over foreign assistance and will insist that there be a central coordinating authority accountable to the Congress.
Mr. Peterson's meetings included one with the President and his principal White House staff,/2/ a lunch with Jack Irwin and Congressman Mailliard, and nine-calls on the Hill attended by sixteen of the Chairmen and senior members of the Foreign Relations, Foreign Affairs and Appropriations Committees. Clark MacGregor participated in two of the meetings on the Hill. A complete list of Members consulted is attached./3/
/2/See Document 50.
General Views. At this stage there is certainly no enthusiasm for new foreign assistance legislation. The malaise which has characterized Congressional attitudes on foreign assistance is believed to continue, accentuated by the disaffection of former supporters disenchanted by the war and/or by what they consider to be competing domestic requirements.
However, the general philosophy behind the new concepts as presented by Mr. Peterson was invariably well received. Chairman Morgan said that without a new rationale he wasn't sure there would be another aid bill. Nevertheless, there are serious, probably crucial, reservations concerning specific aspects of the new approach. The principal issues which arose during the discussions on the Hill are set forth below.
Congressional Oversight. Crucial to the entire program from the Congressional viewpoint is the issue of whether the new legislation will provide what key Members consider to be effective Congressional oversight of the new development assistance programs. The President recognizes this and at the White House meeting instructed Clark MacGregor to come up with the answer.
Central Point of Coordination and Accountability. Essential to effective Congressional oversight but also advocated because all Members consulted feel very strongly there must be such coordination, including in particular foreign policy guidance, at the operating level.
Coordination and Accountability Provided by Statute. To assure adequate Congressional leverage, most Members consulted advocate the creation of the coordinating unit by statute at the agency level, i.e. not in the White House. They expect the heads of the individual agencies to be accountable to the Congress but this is not enough. They want a meaningful overall connection at the operating level.
New Spigots Not New Barrels. Motivated strongly but not exclusively by their concern for effective centralized leverage, every Member consulted advocates the retention or creation of an overall body in which all of the development assistance agencies--OPIC, IDC, IDI, ISDI--could be located. Some Members, Senator Fulbright in particular, don't understand why all the changes contemplated couldn't be achieved within the present AID organization. Most find the new plan providing for proliferation instead of a retraction as advocated in the Congress. Others may be more concerned with the prospect of a Republican regime abolishing one agency (established in its present form by the Democrats) and creating in its place three or four new ones. Members of the Foreign Relations Committee asked whether the new setup would strengthen the State Department's role in foreign assistance. Every Member consulted evidenced deep concern that the new units be established by statute rather than by Executive Order.
Multilateral Institutions. In general the House Members were cool to the concept of greater reliance on international financial institutions as channels for development assistance, but this change was welcomed by Senators consulted. Senator Fulbright thinks this is the best way to expend whatever funds we allocate to this purpose but has reservations regarding the level of funding. Passman and Moss (not consulted this trip) lead the opposition in the House. Once again, Congressional oversight is a basic element in the reaction of the critics.
Multi-Year Funding. Some opposition as fallout from general concern that Congressional oversight over foreign assistance is threatened, but Morgan would welcome three or four-year authorizations.
Separation of Security and Development Assistance. All Foreign Affairs Committee Members consulted and Chairman Mahon (House Appropriations) are convinced that the separation will result in a loss of votes for Development Assistance, a prospect they consider dangerous in the light of recent votes wherein four or five switches would have prevented passage of the AID authorization bill. (We believe the Speaker shares this view.) Chairman Morgan has no objection to the Administration sending up two bills, recalling that the Committee combined them when a previous Administration sent up economic and military assistance bills.
Morgan, Fulbright and all other Members of the Foreign Affairs and Foreign Relations Committees are concerned that the separation of the two bills might result in their Committees losing jurisdiction over Security Assistance. However, once they were assured on this point--Mr. Peterson said he strongly advocates that the present division be retained and that he is supported by influential advisors to the President--the Senators had no objection to separation.
Advance Funding. Mailliard and his Republican colleagues on Foreign Affairs and Otto Passman strongly advocate that the Administration move promptly for a simple annual authorization on the basis of the present legislation and then send up the reorganization proposals. Passman warned that Congress was reluctant to enact continuing resolutions which would provide funds not regularly appropriated beyond sine die adjournment. No Senator raised this point, nor did Doc Morgan who said he would be ready and willing to move on the new legislation as soon as it is sent up. As Passman indicated, advocates of this unusual procedure appear to want to reduce pressure to get the new bills through in this session.
Consultation. There is a strong feeling in both Committees (HFAC and SFRC) that the Administration has reneged on a promise made by Mr. Kissinger when he briefed the leadership after the President's aid message last September and assured them that there would be complete consultations before the new legislation is sent up. This issue did not arise during the Peterson conversations but surfaced in other conversations before, after and during the Peterson visit.
53. Memorandum From the Director of the Office of Management and Budget (Shultz) to President Nixon/1/
Washington, March 9, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. No classification marking.
In the preparation of the new foreign assistance legislation, a policy issue has arisen which needs decision before further drafting can proceed. That issue is the extent of statutory Presidential authorities over foreign aid.
In the case of security assistance (military aid and supporting assistance) and the President's foreign assistance contingency fund, there is no issue--the basic authorities will be in the President as they are now.
The issue does relate to the proposed International Development Corporation and International Development Institute.
There are two choices:
--Option A. The Corporation and the Institute would be created by the new International Development Assistance Act, which would include appropriate details on their structure and management. The basic authorities would be vested by the Act in the boards of the two organizations. The principal Presidential authority specified in the Act would be for the appointment of the boards and other key officers.
--Option B. The Act would vest all basic powers and functions in the President, and would include whatever authority is needed to permit the President to create the Corporation and Institute by Executive action as well as to make appointments. The intention to create those organizations would be restated in your message to the Congress, and testimony of Administration officials would include detailed explanation of the new organization.
Arguments for Option A:
1. Both the Peterson report and your foreign aid message of September 15, 1970,/2/ emphasized new directions for the decade of the 1970's and these new directions will be symbolized by the new organizations. Creation by statute of the Corporation and Institute would reinforce the concept of their "independence," business-like management, and fresh approach to foreign aid. If they are not created by statute, the argument might be made that the new legislation is a "warmed-over" Foreign Assistance Act of 1961. In this connection, the Overseas Private Investment Corporation, which assumed some of AID's functions, was created by statute, as proposed by this Administration.
/2/For the Peterson Report, see Document 128. For text of the September 15, 1970, message, see Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 745-758.
2. The success of new organizations will depend to some extent on obtaining flexibility for their management in carrying out the new programs in a business-like way. This will require persuading the Congress to refrain from applying to the Corporation and the Institute various limitations and restrictions that have burdened AID. Creation of the Corporation and Institute by statute might give greater assurance to the Congress that their management will be sounder than if they were created by executive action. Creation by statute also would give a greater impression of permanence and continuity. (Some would view this as a disadvantage.)
3. The President's appointment power and the fact that government officials, including the Secretary of State, will serve on both boards--and will constitute a majority of the Corporation's board--represent sufficient Presidential influence over the policies and operations of the Corporation and the Institute.
4. Option A might reinforce the intent that the two organizations will be free of short-term foreign policy considerations. (This implies, however, a narrow interpretation of Presidential interest, and the presence of the Secretary of State on the boards weakens this point.)
Arguments for Option B:
1. Currently, and generally throughout the history of our foreign aid programs, the basic authorities have been placed in the President by statute and delegated by him, through Executive order, to appropriate agencies. The logic underlying this practice is that foreign aid, as a major element in our relations with other countries, is preeminently a Presidential function and that, therefore, the President's direct control over the administering agencies should not be diluted by authorities vested by statute in those agencies.
Option B would provide a more certain basis for Presidential control over foreign aid. Experience has shown that multi-headed agencies, as a practical matter, are more independent of Presidential influence than are single-headed agencies. Creation of the two organizations by statute might further attenuate that influence.
2. It would permit a shorter and simpler bill with a minimum of organizational specifics and, therefore, would present less of an opportunity for the Congress to legislate management and organizational detail which could hamstring the new agencies and lessen Presidential influence; e.g., by specifying staggered terms for members of the boards. (There could be, however, some adverse congressional reaction to the absence of organizational provisions in the legislation.)
3. Option B would preserve greater executive branch flexibility in two respects: (a) in the timing of an orderly transition from AID to the new institutions and the way it is carried out, and (b) in possible subsequent reassignments of functions that actual operating experience might suggest desirable.
4. The new directions for foreign aid are principally those of policy and program. To put the new organizations in statute might focus congressional attention unduly on organizational details at the expense of those new direction.
Secretary Rogers favors Option A,/3/ and John Hannah would probably favor it. In addition, Rudy Peterson in his consultations with members of the Congress has indicated that the Corporation and Institute will be established by statue./4/
/3/Document 51 and footnote 8 thereto.
/4/See Document 50.
There is some legal dispute as to whether or not the Congress may constitutionally delegate the legislative power to create a Government corporation, although there is a precedent for this in the Rubber Act of 1948. The bill drafters are preparing both Option A and Option B, and then we will ask for the views of the Justice Department on this question. If the conclusion should be negative, Option B may require a type of agency other than a "corporation" for the development lending program.
While I believe that Option A has merit, my chief concern is Presidential influence over development assistance programs. Therefore, subject to satisfactory resolution of the legal issue, I prefer Option B.
George P. Shultz
/5/None of the options is checked.
54. Editorial Note
A draft of George Shultz' March 9, 1971, memorandum to the President (Document 53) was sent to the NSC on March 5 by James Schlesinger with a request for Alexander Haig's comments. No record of Haig's response to Schlesinger was found, but attached to the OMB draft is the following handwritten note by Richard Kennedy:
"Al--Argument 2 for option A is hardly an argument at all. Merely organizing by statute will not persuade 'Congress to refrain from applying to the Corporation and Institute various limitations and restrictions that have burdened AID.' Congress will have to put up the money and Congress will put such restrictions on the use of the money and how it is administered as Congress believes the situation demands.
"Moreover, organizing by statute will not give greater assurance to Congress that their management will be sounder than if created by executive action. This is fatuous--the people appointed to the Boards and the executive management and the way they perform will be the basis for Congress' judgment on this issue--not whether they are organized by statute or executive order.
"The most important reason for going with option B is only alluded to in my view. Whatever the importance of our Development Goals (which the Corporation and Institute are to serve) they cannot be developed or pursued in a vacuum--they are an important if not essential ingredient of our foreign policy posture. They cannot be pursued without careful integration with our foreign policy machinery--total independence which option A suggests would lead inevitably to serious conflicts within the Government and Congress not the President would be the body to resolve them. As creatures of Congress (under option A) the Corporation and Institute would have the opportunity to pursue courses at variance with our basic objectives. This may be unlikely but it is not impossible. Even with AID in the Executive Branch and subject to State, the level of independence was often a source of concern.
"There is no question in my mind but that we should go with option B." (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 323, Foreign Aid, Volume I 7/70-1971)
55. Information Memorandum From C. Fred Bergsten of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/
Washington, March 12, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/21/71. No classification marking. Kissinger wrote at the top of the page: "What a fanatic."
You indicated yesterday that you agree with George Shultz that the new development assistance institutions should be created via delegation of authority to the President, rather than directly by statute./2/
/2/Kissinger's comments are not further identified. Shultz' opinion is in Document 53.
I fully understand the reason for your judgment. However, I disagree with it and am not sure that you have considered all aspects of the issue./3/
/3/In a March 8 memorandum to Kissinger, Bergsten had strongly argued that the International Development Corporation and the International Development Institute should be created by statute rather than by the President. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID, 1/1/71-12/31/71)
A paramount question is whether the Shultz option is legally possible. His own memo to the President indicates that he prefers the Presidential route "subject to satisfactory resolution of the legal issue". The AID lawyers argue that it is impossible for Congress to delegate power to create a Government corporation. On the other hand, the Treasury lawyers feel that it can be done.
Since this issue is crucial, and in fact determines whether Shultz would even stick by his own recommendation, I have sought a legal opinion from the Department of Justice. It would obviously be extremely embarrassing to attempt the Presidential route and be faced later with a legal impossibility of carrying out our own intent. I will therefore hold off giving you a memorandum to submit to the President on the issue until we get the opinion from Justice early next week.
My guess is that Justice will support the Shultz view that it is possible to go the Presidential authority route. Even with the legal hurdle out of the way, however, I feel that our trying to do so would be a major mistake--if only because it will almost certainly not work.
Numerous Congressional leaders raised the issue with Rudy Peterson during his recent consultations. Dave Abshire's report to Secretary Rogers on the consultations (Tab A)/4/ indicates "every member consulted evidenced deep concern that the new units be established by statute rather than by Executive Order." Peterson met with the Chairmen and sixteen senior members of the Foreign Relations, Foreign Affairs, and Appropriations Committees.
The Shultz option thus looks like a non-starter. This is especially true since there is widespread feeling on the Hill that we have not lived up to your commitment last September for thorough consultations on the new aid program./5/ If we stonewall their clear and unanimous views on an issue like this, we will obviously jeopardize the legislative chances of the whole program.
/5/In his September 15, 1970, statement, the President said: "I look forward to consultations with the Congress on our aid objectives and the ways in which we can achieve them, as a solid foundation for the legislative proposals which I shall submit next year." (Public Papers of the Presidents of the United States: Richard Nixon, 1970, p. 757)
In response to these Congressional views, in addition, Peterson indicated institutions would be established by statute. To whatever extent we regard Peterson as our spokesman, he has therefore already committed us to that course of action. And his role as our spokesman would obviously be compromised if we repudiate him by going the other way./6/
/6/Kissinger wrote in the margin next to the paragraph: "Not decisive."
If we do decide to try the Presidential authority route, despite the considerations cited here and the others mentioned in my earlier memo, I would certainly hope that we would be prepared to switch gears gracefully--and accept the creation of the institutions by statute--in response to the Congressional insistence on doing so which is virtually certain to emerge. How could we refuse without raising serious doubts about our sincerity in creating "independent" institutions? I fully share your objective of retaining effective Presidential control over development assistance, but feel that a better way to do so is to minimize suspicion of our intent by avoiding such a line of questions.
In short, why butt our heads against a stone wall and exacerbate Congressional suspicion of the Executive in the process? I urge you to re-consider your position on the issue before you have to make a firm recommendation on it.
56. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
Washington, March 17, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Secret; Exdis. A copy was sent to Schlesinger on March 22, without the President's comments (see footnote 5 below). This memorandum is attached to a March 19 memorandum from Kennedy to Kissinger calling his attention to Shultz' concern about Secretary Laird's Congressional testimony on March 24 before the foreign assistance legislation went to Congress. On the back of his memorandum Kennedy wrote the following note on March 20: "Schlesinger called to say that they have agreed to have Laird testify but only as to content of FY 72 budget. No mention will be made of organizational arrangements. If asked about new legislation answer is to be that it will be submitted in a few days." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71)
Your new "security assistance" program will comprise grant military aid (MAP), foreign military sales (FMS), supporting economic assistance--which requires a home due to the dissolution of AID--service-funded military assistance (MASF), the public safety program and the contingency fund. In FY 1971 these amounted to $5.6 billion of which $3.4 billion go to Southeast Asia. At Tab C is the report of the Under Secretaries Committee on the program./2/
At present, State has legislative responsibility for providing policy guidance for all security assistance programs except military assistance for Vietnam, Laos, and Thailand, which are in the Defense Department budget. AID presently administers the public safety and supporting assistance programs. Defense administers MAP and foreign military sales and, in fact, if not by law, has a large measure of policy control over both. All security assistance legislation, except that funded in the military budgets, goes through the Foreign Affairs and Foreign Relations Committees.
There are two major organizational issues which must be decided for the new program:
--Whether State or Defense will administer supporting economic assistance (now administered by AID under general policy direction of State).
--Whether State will retain its statutory authority to provide policy guidance and program direction for all aspects of security assistance.
The decision on these issues will affect a third issue--which committees of the Congress will have responsibility for processing annual authorizations.
Option 1: Give DOD Policy Primacy
Defense wants to take over State's present responsibilities for providing policy guidance and program direction for all security assistance, and wants to administer all aspects of security assistance including supporting economic assistance./3/ This implies a shift of Congressional responsibility from the Foreign Affairs to the Armed Services Committees.
/3/See Documents 134 and 135.
Option 2: Maintain State Policy Primacy
State wants to maintain its responsibility for providing policy guidance and program direction for all aspects of security assistance. It also wants to assume AID's present responsibilities for the management of supporting economic assistance./4/ Defense would continue to administer military assistance and exercise the same functions it does at present. This implies continued Foreign Affairs Committee responsibility in the Congress.
/4/See Documents 30 and 49.
The choice among the options turns on the following issues:
1. The role of political and economic considerations in determining military and supporting economic assistance, versus the role of defense tradeoffs between friendly and U.S. forces.
Secretary Rogers contends that, in most countries, political considerations such as the possible role of military assistance in maintaining the power balance within a country (e.g. Brazil) or strengthening an alliance (e.g. Turkey) and economic considerations (e.g. the desire to achieve economic stability in Indonesia) should be weighed heavily in determining our security assistance. Secretary Laird, on the other hand, believes that in implementing the Nixon Doctrine DOD should have primacy in security assistance to enable DOD planning to emphasize the tradeoffs between U.S. forces and friendly forces.
Secretary Rogers is correct in contending that force tradeoffs are of major concern in only a few countries, whereas political and economic considerations bear most heavily on our policy choices in most countries. Moreover, DOD already has control over the MASF program (over half of our entire security assistance effort) for the Southeast Asian countries where the U.S./friendly force tradeoff issue is most important. These considerations argue against Option 1 (DOD primacy).
2. Congressional and Public Acceptability
Secretary Rogers, OMB, and your own legislative experts believe that you would be risking a major and futile confrontation with the Senate and House Foreign Affairs Committees if you sought to shift security assistance authorizing responsibility to the Armed Services Committees. They point out that, despite problems with Senator Fulbright, passage of last year's supplemental showed that Congress (particularly the House) is willing to fund the Nixon Doctrine.
Secretary Laird, however, disagrees. He believes the Armed Services Committees will be more forthcoming and that, therefore, you should seek such a transfer and urge Senator Stennis to accept the additional responsibility he has indicated he does not want.
3. Presidential Flexibility
One of the strong points of our current program is that it gives you the option in most countries of relying on either Defense or State/AID funding for local forces. In Cambodia last year, it was of vital importance that we could use supporting assistance to fund the military assistance program before passage of the supplemental--and as a fall-back position in case the supplemental failed. Option 2 would preserve more flexibility for individual countries than any of the others, by maintaining the present division of authority between State and Defense.
These considerations on balance favor Option 2 (State primacy); only the force tradeoff issue supports DOD primacy (Option 1). The remote chance of shifting Congressional jurisdiction away from the Foreign Affairs Committees, and the high cost of even trying to do so, is perhaps the overriding point.
You need to decide now on the organization of security assistance for FY 1972, to be incorporated in the new aid legislation which will go up shortly. However, this need not be a decision for all time. I recommend that you authorize Option 2, with State picking up for now the supporting economic assistance and public safety programs handled at present by AID.
Based on an assessment over the coming year of State's effectiveness in handling these responsibilities, and of possible Congressional receptivity to a later shift from the Foreign Relations to Armed Services Committees, you can then decide whether to continue this arrangement in the future or shift partial or full responsibility to Defense. Making this decision in effect a tentative one may in fact serve as an incentive to State to develop the needed analytical capacity to effectively discharge its responsibilities, and to the Foreign Relations Committees to give your programs better support. We could not of course indicate publicly that the decision was temporary, but conveying the word informally would achieve these objectives.
Subject to reservation covering the duration of the decision, I support Secretary Rogers' proposal of Option 2: State primacy over security assistance policy and administrative responsibility for supporting economic assistance. OMB concurs.
/5/President Nixon initialed this option and wrote at the bottom of the page: "The major concern is the political storm which would be raised in Congress if we changed--just isn't worth it. I agree with MacGregor it would be a futile fight."
57. Memorandum From the President's Assistant for International Economic Affairs (Peterson) to President Nixon/1/
Washington, March 30, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Confidential. Attached to an April 1 memorandum from Bergsten to Kissinger that reviewed Peterson's options. Bergsten recommended Option 4 rather than Option 3.
The reorganization of A.I.D. will result in several new bilateral development agencies
--International Development Corporation, to administer the bilateral loan program.
--International Development Institute, to handle the revamped technical assistance program.
--Overseas Private Investment Corporation, to administer foreign investment guarantees.
This poses complex issues of coordination within the Executive Branch, including how we keep down the number of independent agency heads reporting directly to you, and has created concern in the Congress. You will recall that Rudy Peterson reported widespread Congressional interest in having a single coordinator for foreign assistance operationally responsible for the program and accountable to the Congress.
We have four choices:
1. Establish independent agencies--policy coordination through the Council on International Economic Policy.
2. Establish independent agencies--coordination in the Department of State.
3. Establish a U.S. Development Administrator, who would be Chairman of the Board of all three institutions. Each agency would have a President; the three Presidents would constitute an Executive Committee, chaired by the Administrator, to assure operational coordination.
4. Establish independent agencies--coordinated through a U.S. International Development Board, established by statute, in the Executive Office. (The Board would consist of the heads of the aid agencies plus representatives from State, Treasury and Agriculture.)
Under any of the options foreign policy guidance will come from the National Security Council, foreign policy coordination will be assured by having a representative of the Department of State on the Board of each agency, and foreign economic policy coordination will take place through the Council on International Economic Policy.
The advantages and disadvantages of these choices are spelled out in the attached memorandum./2/ After extensive discussion I have concluded that Option 3 best meets your objectives and Congressional requirements. George Shultz concurs.
/2/Dated March 30; not printed.
We have reviewed Option 3 with Rudy Peterson, and after checking it with three of his task force members, he said they all feel it is "an ingenious response to the Congressional concern." He feels strongly, however, that the Administrator (i.e., the joint Chairman) should become a full member of the Council on International Economic Policy, instead of being invited to participate only when development issues are being discussed. We can consider this question later, and I promised Rudy he would have a full hearing when it is necessary to face this issue.
The Secretary of State prefers Option 2. The Secretary's memorandum is attached at Tab A, of the detailed memorandum./3/
/3/See footnote 8, Document 51.
I recommend you approve Option 3./4/
/4/Neither the Approve nor Disapprove option is checked, but see Document 58.
58. CIEP Decision Memorandum No. 2/1/
Washington, April 5, 1971.
/1/Source: National Archives, RG 59, S/S Files: Lot 82 D 126, Box 5197, CIEP Decision Memoranda. Confidential. Copies were sent to the Secretaries of Agriculture, Commerce, and Labor; the CEA Chairman; the President's Assistant for National Security Affairs; the Executive Director of the Domestic Council, and the Special Trade Representative.
The President has carefully considered the issue of how we might best coordinate the bilateral development assistance agencies which we will propose to the Congress in the new aid legislation as raised in the memorandum of the Secretary of State, dated March 5, 1971,/2/ both to assure efficient operation and adequate accountability to the Congress.
/2/See footnote 8, Document 51.
In view of the previous decision to establish three separate, independent agencies,/3/ the President has decided that coordination can best be assured by his appointing a coordinator, responsible to him, for U.S. development assistance, who would be Chairman of the Board of the proposed International Development Corporation, the proposed International Development Institute, and the existing Overseas Private Investment Corporation. In the latter case, he would assume the responsibility which is now discharged by the Administrator, A.I.D.
/3/See Document 136.
To assure effective operational coordination he will chair, in addition to his other duties as Chairman of the three boards, an Executive Committee consisting of the Presidents of these three organizations.
While it is desirable to avoid duplication of service functions between these three agencies, providing the coordinator a large number of central functions may undermine the functional specialization of these agencies. The common service functions, therefore, will be kept to the minimum feasible.
Peter G. Peterson
59. Memorandum From Secretary of Defense Laird to President Nixon/1/
Washington, April 9, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume III 12/70-6/71. Secret. A stamped notation reads: "The President has seen." Attached to a May 4 memorandum from Kissinger to the President summarizing Laird's points and noting that Kissinger had sent a brief reply to Laird that indicated that the President's interest in Laird's study that would be used as the basis for re-examining military sales policy. On Kissinger's memorandum to the President, Nixon wrote: "K--I agree totally with Laird's concern--The foreign service types will of course disagree--I don't want a leisurely study of this made. I want action--soonest possible to reverse this trend. Inform Connally of my concern. He shares it." A May 6 memorandum from Haig to Bergsten informed him of the President's reaction to Laird's memorandum and asked Bergsten to monitor closely the progress on Laird's study. (Ibid.) In a May 15 memorandum, Haig also asked Bergsten to provide a memorandum from Kissinger to Connally. (Ibid., Box 226, Department of Defense, Volume XI 2/24/71-5/15/71)
Armistead Selden's 26 March letter to Dr. Kissinger outlined the vigorous military sales activities of the United Kingdom and France in Latin American countries--and our serious doubts about the wisdom of US statutory sales ceilings in that region./2/
Our problem is, I believe, broader than Latin America and statutory ceilings. Remembering the 1967 Congressional concern about the validity of arms sales, this Administration adopted a low profile approach to such transactions--agreeing to honor obviously valid purchase requests arising at the initiative of friends and allies but taking no initiatives ourselves. This new policy on US sales has coincided with substantial progress in the technological ability of industrial European countries to develop and produce such equipment for themselves and for sale to others--and has encouraged them to enter the free world market. They have been quite successful: Even as of a year ago, the US share of the free world defense market (details in attached tables)/3/ had dropped from virtual monopoly to 51% as the French share increased to 22%, the British to 13%, the German to 5% and the Italian and Canadian to 4% each.
The trend is worsening. During FY 1970, British and French military export orders worldwide totaled about $1.88 billion (not even counting minor equipment and support) while US orders (counting everything) declined to $1.5 billion.
Moreover, our competition is taking over in the large number of developing countries where we, in the absence of grant aid, want to maintain that influence that now can come only or largely from the relationship of dependable supplier of defense equipment. During FY 1970, British and French orders from Latin America totaled an incredible $760 million while the US total was $46 million. In our own backyard during that year we had less than 6% of the market.
While our data are quite incomplete, it appears that the Soviet is also trying to move into the free world defense market. Soviet sales deliveries (we understand most if not all Soviet "assistance" is on terms of sale with long repayment periods and low interest) totaled $890 million during 1970--more than double the $434 million of 1968 and $305 million in 1969. Major recipients were Iran ($150 million), Iraq ($25 million), Libya ($40 million), the United Arab Republic ($650 million), and Somalia ($10 million). India was a large recipient in 1969 ($153 million). A $50 million transaction (terms unknown) also occurred in 1969 between Communist China and Pakistan. Clearly, the Communist world views military exports as a significant element of its foreign policy relationship with friends and potential friends.
In regard to competition in the free world defense market, we must not assume that the current US disadvantage is redressable solely by US policy. It increasingly occurs that US equipment is too sophisticated for some countries. Small British frigates and submarines sold to Brazil simply have no US equivalent. In the absence of the International Fighter now starting development, the US, similarly, would not have a small, inexpensive, easy-to-maintain, and easy-to-operate air defense fighter that is needed (against the MIG-21) by many of the developing countries.
Of course, there are some purchase requests that we simply should not honor whatever the merits of the industrial/financial consequences may be. There are desires for acquisition of first-line equipment by less-developed countries that we do not want to accommodate--for reasons of arms races, imprudent expenditure or provocation to neighbors. There are releases of technology that we do not want to approve for reasons of security.
But within such limitations, I believe there is much that we can do within current authority to bring about a US posture and practice in regard to arms sales which are more consistent with overall US interests. One such major US interest is achievement of the Nixon Doctrine--the orderly transition from US responsibility for free world defense to a more equitably shared responsibility. It is, I believe, indefensible to anticipate greater needs for US grant aid to develop a maximum self support capability throughout the free world without anticipating an equivalently expanding sales relationship with those friends and allies already able to pay their own way.
I am setting in motion a review of possible modifications in our military sales posture and practice. First, in regard to legislative authority, we might present to the Congress
--the merits of avoiding regional ceilings which add an arbitrary and unnecessary restraint to our normal case-by-case assessment of the validity of specific arms sales;
--the need for and the practicability of removing such other arbitrary restraints as the Conte (sophistication), Symington (diversion of resources), Reuss (dictators) and Pelly (fishing rights) Amendments;
--the continuing need for adequate credit appropriations to accelerate the transition from grant to sales.
Second, in regard to Executive Branch teamwork in this matter, we will consult with
--State on the features of security assistance legislation which promise greater and more effective reliance on sales;
--Treasury on the adoption of more attractive credit terms and conditions;
--Commerce on more effective DOD participation in the National Export Expansion Council;
--Office of Management and Budget on budgetary and fiscal aspects.
Third, within DOD, we will review the possibilities and merits of
--improving the effectiveness of our efforts to assist US industry and the banking community in their export efforts;
--further relaxation of our restraints on the releasability of technology;
--modifying or abandoning our policy of placing a nonrecurring cost recovery surcharge on our military export sales prices;
--relaxing DOD unwillingness to make "offset" procurement arrangements with governments that procure from us;
--using our "fixed price" statutory authority to assign a portion of the normal sales prices to the US mobilization base interest for selected equipments or, alternatively, to assign a portion to grant aid;
--modifying or abandoning our 50% "gold flow rule" under which we have effectively excluded foreign ability to sell to us, and, consequently, reduced their desire to buy from us.
I will come back to you on the results of this review./4/
/4/No report from the Department of Defense on this subject was found.
Melvin R. Laird
60. Action Memorandum From the President's Assistant for International Economic Affairs (Peterson) to President Nixon/1/
Washington, April 13, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. No classification marking. Copies were sent to Kissinger, Shultz, MacGregor, Ziegler, and Klein. The memorandum is attached to an April 15 memorandum from Bergsten to Kissinger concerning Kissinger's subsequent decision not to participate in the April 20 Congressional briefings and the press briefing. Bergsten pointed out that the package would have a "rough time" with Congress and asked Kissinger to reconsider. Kissinger declined and designated Schlesinger instead.
The legislation for the new foreign assistance program is now ready and I list below the major actions we propose to take to advise Congress and the public about the new program. Considerable time has elapsed since your September message on the subject/2/ and it is therefore most important that you personally participate in advising the leadership of Congress about the importance you attach to this reorganization.
/2/Reference is to the September 15, 1970, Presidential statement. See footnote 2, Document 53.
The legislation will be ready for submission after the Easter recess. I recommend we submit the legislation on April 21. This is right after the Easter recess and allows sufficient time for advance briefing of Congressional leadership.
About April 15, we will brief the senior staff members of the appropriate committees.
I recommend that you devote part of your regular Republican leadership meeting on Tuesday, April 20 to a briefing on the new aid legislation./3/
/3/The President met with the Republican Congressional Leadership in the Cabinet Room in the morning of April 20. The list of attendees includes Schlesinger but not Kissinger. (National Archives, Nixon Presidential Materials, White House Central Files, President's Daily Diary)
In addition you should invite the leadership of the relevant committees to a briefing on the reorganization on April 20. I suggest you hold this briefing at 9:00 a.m.--right after the Republican leadership meeting./4/ Attached at Tab A is a suggested list of members of Congress to be invited to the bipartisan briefing with you./5/
/4/The meeting was not held. (Ibid.) On April 16 Bergsten sent a memorandum to Kissinger suggesting that the President's participation in the bipartisan Congressional briefing would be a "serious error." (Ibid., NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71)
On the day the legislation goes forward (April 21) there will be a press briefing covering both security and development assistance. We would invite White House, State, Treasury and DOD correspondents. I recommend we start the briefing at 10:00 a.m. and arrange it so that there will be an opportunity for you to make a short (one to two minutes) statement at the outset which the TV could tape and release later that day.
The briefing would be handled by Kissinger and myself with appropriate staff to field detailed questions.
We are planning a series of separate briefings including briefing for select foreign government representatives and non-governmental organizations. We are also arranging for a series of informal discussions and briefings with select members of Congress and their staffs just before and following the submission of the legislation. These briefings will be done by the various agencies
We have contacted Rudy Peterson. He will participate in the advance briefings and be available for the hearings. His schedule does not permit him to be in Washington on April 21.
I recommend you approve the above scenario.
/6/None of the options is checked.
Messrs. MacGregor, Shultz, Kissinger, Ziegler, and Klein have been consulted and concur in the proposed arrangements.
61. Information Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/
Washington, August 9, 1971.
/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 323, Foreign Aid, Volume I 7/70-1971. No classification marking. A stamped notation on the memorandum reads: "The President has seen."
Below are the figures on foreign assistance which you requested./2/ They are reflected in two categories--(1) bilateral U.S. aid, both non-military and MAP, and (2) aid provided through multilateral organizations. The breakdowns include approved obligations for FY 1971 and requests for FY 1972 as separate entries.
/2/The request has not been further identified. A similar request was made on February 19, 1972, on the President's behalf, in a telephone call from Haldeman to Haig, requesting that the data be disaggregated to reflect the totals for Europe and developing nations. Haig replied in White House telegram 20335 (Tohak 52) to Kissinger in Guam, February 20. (Ibid., Volume II 1972) On February 21 the President traveled from Guam to Beijing.
At Tab A is a breakout of the specific components of the bilateral U.S. aid.
At Tab B is a breakout of the specific components of the multilateral aid.
I. Bilateral U.S. Aid
II. U.S. Aid Extended through Multilateral Organizations
Includes contributions to the UN, International Development Association, IBRD, Asian Development Bank, International Financial Corporation & Inter-American Development Bank. A breakdown by agency is available only through FY 1970 except as footnoted.
/*/Includes $275 million for IDB
/**/Includes $173 million for UN assistance
62. Memorandum From the Under Secretary of State (Irwin) to the Deputy Director of the Office of Management and Budget (Weinberger)/1/
Washington, September 17, 1971.
/1/Source: National Archives, RG 59, Central Files 1970-73, AID (US). Limited Official Use. A copy was sent to Kissinger. Beginning with an August 16 memorandum from Acting AID Administrator Roderic O'Connor to Under Secretary Johnson, AID persistently called attention to the need for decisions on how the foreign assistance reduction was to be handled. Was the reduction to be in outlays, new obligations, or budget authority? Were supporting assistance and programs dealing with refugee assistance in India and Pakistan exempt as they were not "foreign economic aid in the regular sense"? O'Connor's August 16 memorandum and a number of others on the same subject are in the Washington National Records Center, Agency for International Development, AID Administrator Files: FRC 286 75 A 13, Chron Files for August and September, 1971.
The Department and A.I.D. are deeply concerned that there is not yet a decision on the details of the foreign assistance expenditure cut announced by the President one month ago on August 15./2/ We are in an increasingly difficult position with the Congress and beginning to be in an embarrassing position with foreign governments.
/2/The New Economic Policy announced on August 15 called, inter alia, for a reduction of 10 percent in foreign assistance expenditures. See Public Papers of the Presidents of the United States: Richard Nixon, 1971, p. 887.
Recently the Secretary of State and the A.I.D. Administrator each had to testify before the Congress that details of the cut were not yet available. We continue to make a similar response to the many requests for information that we receive from foreign governments. The recent announcement that the cut will not apply to Latin America,/3/ while helpful to us in Latin America, increases our problems with governments in other parts of the world and complicated further our position with the Congress.
/3/Kissinger informed Rogers, Connally, Shultz, and Hannah in a September 10 memorandum that "in view of our special interest in assisting Latin American economic and social development" the President had decided to exempt the Latin American aid program from the 10 percent reduction in foreign aid that was part of the New Economic Policy. (Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 A 15, Latin America)
The problem, we believe, can be made simple. The published estimated outlays for FY 1972 for bilateral economic assistance are $1,842 million; a 10 percent reduction amounts to $184 million. If Supporting Assistance is excluded, as we believe it was intended to be and should be, the reduction is $118 million. If it is not excluded, we will have severe additional difficulty in Southeast Asia (not to mention elsewhere), added to an already difficult economic and financial situation. What is needed is an OMB decision establishing a new expenditure ceiling, so that we can advise the Congress. There seems no reason why the affected agencies should not be relied upon to manage their resources within the new outlay ceiling, as they were expected to do under the published ceiling. The longer we delay the decision, the more difficult the cutting job becomes.
I stress that while we can absorb the required expenditure cuts with difficulty, any reduction in the foreign assistance appropriations request now before the Congress would be disastrous. This is true for all accounts but particularly for Supporting Assistance. You are fully familiar with the current negative attitudes of the Congress toward foreign assistance--particularly the attitude of the Senate toward Supporting Assistance which is a key element in support of the Nixon doctrine. If the Administration proposes reductions in its FY 1972 appropriations request--which are only slightly above the FY 71 request which was the lowest since 1958--the Congress will simply begin from a lower base its normal practice of making deep cuts in the President's request. The Congress will not stand idly by and allow the President to make the cuts instead. It is essential, therefore, that we be allowed to effect the 10 percent foreign assistance expenditure cut through administrative measures rather than linking them to reductions in requested budget authority.
In the unlikely event the Congress does not cut appropriations in its usual way, we would of course be prepared to take further administrative actions to insure that expenditure savings in FY 1972 did not result in increased expenditure pressure in FY 1973.
In summary, we believe it imperative to reach a decision quickly and that the decision be directed to 1972 expenditures, not appropriations, and exclude Supporting Assistance. I will be happy to discuss this with you if you wish
John N. Irwin II
Return to This Volume Home Page